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What were some of the big transactions in the we have seen the overall average net
suburban office market? rental rate increase approximately 8%
to $14.39 per sq. ft. in Q4 2016. Despite
this drop in vacancy and an increase in
SK: Unlike the slow leasing velocity in 2015, the suburban office market asking rents, prospective tenants are still
gained some traction in 2016 making supply extremely tight. operating under favorable conditions and
Increased demand and lack of new supply have resulted in the suburban can receive very generous inducement
office vacancy rate dropping from 7.37% in 2015 to 6.26% in 2016. As packages as landlords look to shore up
has been the historical trend for suburban office space, the main drivers of vacancy ahead of increased supply. In
demand continue to be user groups seeking inexpensive parking, shorter 2017, the Class B office market will
commute times, proximity to clients, and lastly lower gross occupancy costs. likely be the most stable asset class with
minimal change occurring.
However, it’s worth noting that with the average net rental rate in the suburbs
increasing to $14.22 per sq. ft., gross occupancy costs for tenants in the Once again the Class C office market in
suburbs are escalating into the realm of traditional downtown office buildings. Winnipeg has been the net loser of all
As a result, tenants must conduct a thorough evaluation of their existing three asset classes. The overall vacancy
office space in comparison to the available market options as it relates to the rate continued to climb, currently sitting at
productivity and efficiency of their operations. 12.86% heading forward in 2017, up from
11.00% in Q4 2015. One of the positives
Touching on noteworthy suburban office transactions, BOLD Innovation is that with many turn-of-the-century
Group would be at the top of the list in 2016. This humble software buildings that, while functional, require
development company from Ile Des Chenes, Manitoba increased their major capital upgrades and repairs,
presence in the market from 3,000 sq. ft. to approximately 25,000 sq. ft. landlords have increased asking rental
backfilling the former Stuart Olson building at 50 Fultz Boulevard.
rates in order to justify the inputs.
Other notable transactions include the 5,000 sq. ft. lease of Launch Coworking Conversely, as gross occupancy costs
Space at 1460 Chevrier Boulevard, the 7,600 sq. ft. lease of Think Shift have increased in this sector, tenants have
Advertising at 627 Erin Street, 12,000 sq. ft. leased by MFNERC at 1200 been pushed upward into either the Class
Portage Avenue, and the 11,000 sq. ft. lease by Stuart Olson at 1370 Sony Place. B or Class A markets. Looking ahead in
Looking forward in 2017, we predict demand for suburban office space will 2017, we do not foresee any significant
remain steady but the vacancy rate will climb as new supply comes online vacancy change; however, landlords will
early in the year. Despite the added supply, we also predict that the average consider inventory rehabilitation and/or the
asking net rental rate will increase as tenants continue to demonstrate a demolition of obsolete product will continue
willingness to pay a premium as long as the product’s value is evident. in hopes of bolstering this asset class.
2017 sets the stage as an exciting time
What were office vacancy rates at in for the Winnipeg office market. With
2016? Any predictions for 2017? True North Square becoming an ever-
present reality, the downtown core hasn’t
experienced this much development/
SK: 2016 was a year of positioning for all downtown landlords but especially supply since the early 1990’s. Tenants
in the Class A market. and landlords will continue to jostle

With True North Square actively marketing space and inching closer to as premium space becomes a new
completion, existing Class A landlords have looked to enhance their buildings trend. Gone are the days of “old and
to attract new prospects as well as retain existing tenants. Overall they have inexpensive” and in are the days of “high
done a fantastic job of completing this task in 2016. quality and efficiency”.

At the end of Q4 2016, Colliers International tracked the Class A vacancy Given the change in the provincial
rate to be approximately 3.58%, significantly down from 6.72% in Q4 2015. government in 2016, it is likely we will see
Further demonstrating the overall health of the market, the overall Class A contraction and consolidation from the
average net rental rate increased from $19.56 per sq. ft. to approximately Province of Manitoba as well as Public
$20.65 per sq. ft. Works and Government Services Canada
moving forward. With minimal new private
Compared to previous years, the Class B office market received positive
momentum in 2016 likely due to the posturing occurring in the Class A business entrants to the market we will
market. Illustrating this in terms of vacancy rate, we saw a significant continue to rely on the organic growth of
drop from 11.14% in Q4 2015 to 9.10% in Q4 2016. Even more positive, existing tenants to drive the stability of the
overall office market.

11 Manitoba 2017 Commercial Building Directory